On October 30, 2006,the parties submitted their praecipes on the practicality and effectiveness of each others’ correctives, as required by Judge Kessler in her Order #1025 (Kessler Order #1025 on Correctives, Oct. 19, 2006.) She had found the parties’ previous filings had raised new issues, and some suggestions might require too “hands on” an approach from the Court, and require too much time to implement.

The whole issue, however, is moot at the moment. Judge Kessler had planned to order a final ruling on Corrective statements by Nov. 9, but that was before Halloween, when the DC Court of Appeals stayed all aspects of her Aug. 17 judgement and remedial order.

But still, the filings are instructive.

Oddly enough, all the parties felt their proposals were most practicable and effective.

The Court wanted to know:

(1) The practical impact of adopting the proposal contained in the submissions of the Government and Plaintiff-Intervenors, including that the Court consult with appropriate independent experts, to be paid by Defendants, to evaluate any proposed corrective statements, and that the Court undertake basic market testing research to evaluate the effectiveness of such statements

(2) Whether the corrective statements should indicate that they are being issued pursuant to Court order

(3) Whether the Court should approve all relevant details of such corrective statements, such as print size, colors, spacing and format, voice-over in television advertisements, etc.

DOJ felt its proposal for an independent marketing firm to develop and test the proposals would not cause the undue delay Judge Kessler had feared, and could be done by the February 2007 deadline for dissemination of the correctives. Also, considering the Defendants’ track record in forthright and honest communications–as found by this very court, and as markedly exemplified in the Defendants’ own current proposed correctives–hiring independent experts is the only viable option.

Independent market consultation and testing would also:

1. Determine the effectiveness of Lorillard’s and the Intervenors’ proposals that the correctives openly state that they are mandated by court order.

2. Relieve the court of dealing with the minutiae of format decisions in type, graphics and voice-over.

DOJ provides a very revealing chart of each company’s former statements, compared with its proposed corrective statements on each issue.

Defense’s proposed statements almost flagrantly skirt the very subterfuges that brought them low in the first place. As DOJ’s filing states,

Defendants’ submissions demonstrate, starkly, that the implementation of the corrective statements cannot be left to their discretion.

While Judge Kessler’s latest Oct. 19 order did not mention the need for “exact language,” the companies’ filings lambast DOJ for attempting to “modify the Court’s (Aug. 17) judgement” by not providing exact language, and by insisting that marketing experts should determine, after suitable testing, the exact wording and formatting of the statements–a requirement which the Joint Defense (minus Liggett) filing says would “draw out the process indefinitely.”

DEPARTMENT OF CORRECTIONS

Philip Morris’ statements, on the whole, seem most direct, but their secondhand smoke statement still cavils:

Public health officials have concluded that secondhand smoke from cigarettes causes disease

BATCo manipulates the design of its cigarette brands to ensure that every cigarette of a particular brand or style will deliver the amount of nicotine (within 0.1 mg.) advertised for that brand, according to the test for nicotine in cigarette smoke adopted by the International Standards Organization.

But the Deja Vu Prize has to go to Lorillard and RJR, for taking us back 40 years in time, and giving us, yes,

“The Surgeon General has concluded . . . “(!)

RJR and Lorillard also make use of a disclaimer of mandate, ie, “This message is furnished by [Defendant] pursuant to a Court Order and is taken from the 2006 Surgeon General’s Report” (RJR) and “The following statement is made by Lorillard Tobacco Company pursuant to a Court Order in United States of America, et al. v. Philip Morris USA, Inc., et al., Civil Action No. 99-2496 (GK) (Order #1015, Aug. 17, 2006, at 4; Final Op. at 1636) (on appeal)” (Lorillard).

As the DOJ filing states,

Clearly, it is the Court’s intent that the corrective statements will not simply be a pro forma utterance of mandated words, but rather, will have the effect of actually correcting defendants’ ongoing false statements.

Defendants, however, have each proposed text that makes no progress beyond the first step forward acknowledged by the Court and that may constitute continuing affirmative statements that are fraudulent. For example:

BATCo also continues to acknowledge only “health effects” from smoking, rather than any of the actual fatal diseases caused by smoking.

• Philip Morris’s proposed statements are virtually identical to its existing website statements (which the Court clearly found to be only a “first step” toward correcting its decades of deceit); the only change in content is its statement that the nicotine in cigarettes is addictive and that “well-known” design features affect the delivery of nicotine.2

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Text follows of:

UNITED STATES’ PRAECIPE RESPONDING TO ORDER #1025

http://www.tobacco-on-trial.com/files/20061030dojprae1025.pdf

Exhibit A: Comparison of Defendants’ Current Public Statements With Their Proposed “Corrective” Statement

http://www.tobacco-on-trial.com/files/20061030dojcorrcompare.pdf

CERTAIN DEFENDANTS’ MEMORANDUM IN RESPONSE TO THE COURT’S OCTOBER 19, 2006 ORDER

http://www.tobacco-on-trial.com/files/20061030jdresponse.pdf

PLAINTIFF-INTERVENORS’ SUBMISSION PURSUANT THE COURT’S ORDER #1025

http://www.tobacco-on-trial.com/files/20061030venorsresponse.pdf

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http://www.tobacco-on-trial.com/files/20061030dojprae1025.pdf

**———————————————————

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

_________________________________________

UNITED STATES OF AMERICA,

Plaintiff,

and

TOBACCO-FREE KIDS ACTION FUND, et al.,

Plaintiff-Intervenors,

v.

PHILIP MORRIS USA INC.,

f/k/a PHILIP MORRIS INC., et al.,

Defendants.

Civil Action No. 99-CV-02496 (GK)

Next scheduled appearance: None Scheduled

__________________________________________)

UNITED STATES’ PRAECIPE RESPONDING TO ORDER #1025

The Court has directed the parties to address certain questions pertinent to its October 16, 2006 Proposal for Corrective Statements. Order #1025. Through this filing, the United States responds to the specific questions posed by the Court, as follows:

(1) The practical impact of adopting the proposal contained in the submissions of the Government and Plaintiff-Intervenors, including that the Court consult with appropriate independent experts, to be paid by Defendants, to evaluate any proposed corrective statements, and that the Court undertake basic market testing research to evaluate the effectiveness of such statements

The United States’ proposal is practical. Consulting with an independent advertising and market research firm will serve to minimize the need for the Court to deal with the detailed design and development aspects of the statements in the first instance. The marketing firm will design and test the statements for effectiveness based on the proposals already submitted and any further guidance provided by this Court. Only after completion of market testing and a review of

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2

the results will the Court make its final determination about the statements to be disseminated.

As the Department of Justice is the “enforcing agent for [the Court’s final] decree,” Final Op. at 1644, it is its considered recommendation that its proposal be adopted to ensure meaningful enforcement of the corrective statement remedy.

In fact, if independent experts are not consulted, the Court will either have to make these precise design determinations – aspects of message communication that can have a major impact, according to the evidence elicited in this case, see, e.g., Krugman WD at 187-197 (testimony regarding ineffectiveness of cigarette warnings) – or else leave all such decisions to the discretion of defendants. The latter option is clearly inappropriate given this Court’s findings with respect to defendants’ lengthy record of manipulation and deception through its communication with the public.

To the extent there is a concern about an unwarranted delay associated with this process, there is no indication that significant, or perhaps any, delay will be incurred. If the Court adopts the United States’ proposal, a marketing firm could be retained immediately to develop and test the statements, based upon the proposals already submitted, as directed by the Court. Because the majority of the corrective statements are not currently scheduled to begin to be disseminated until February 2007, there should not be delay1. Defendants can arrange for the purchase of media time/space and engage in other logistical planning while the statements are being tested by the market research firm.

With respect to the onserts, Philip Morris has argued that it will be unable to meet the

—–

1 According to the Court’s Final Order, some of the defendants are scheduled to publish the corrective statements in full page newspaper advertisements beginning in December 2006. To the extent the statements are not finalized by that time, the United States recommends that the commencement of dissemination via newspaper ads be moved to February 2007 – the date dissemination begins with respect to the other media.

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3

Court’s timeline if it does not receive the final language by November 9, 2006. See Philip Morris USA’s Proposed Corrective Statements as Compelled by the Final Judgment and Remedial Order, at 9. There are at least two options to address this concern that will cause little, if any, delay in the overall process. First, the Court could order defendants to include the corrective statement in which the Court has the most confidence absent market testing in their February 2007 onsert installment. That could certainly be accomplished by November 9. In the meantime, evaluative market testing can be done on that corrective statement, as well as the other statements. Thereafter, beginning with the June 2007 onsert installment, the Court can order defendants to publish independently developed, market tested corrective statements.

A second option is to order all the proposed statements to undergo initial market testing, with at least one statement to be fully evaluated and completed by mid-December. The Court could then commence dissemination of the corrective statements in all media excluding onserts in February 2007, pushing back the commencement date for the onserts to March 2007. Although this would create a month delay in dissemination of the statements on onserts, it may well provide the level of comfort in the effectiveness of the remedy that warrants such a relatively minimal delay. Given the significance of this remedy, the possibility of a short delay is justified to achieve the purpose of the statements.

(2) Whether the corrective statements should indicate that they are being issued pursuant to Court order

R.J. Reynolds and Brown & Williamson jointly maintain that each of the corrective statements should include a declaration to the effect that “this message is furnished by [defendant] pursuant to a Court Order.” See Certain Joint Defendants’ Submission of Proposed Corrective Statements Pursuant to Order #1015 (RJR and B&W Proposal). Lorillard maintains

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4

that each of the corrective statements include the clarification that “The following statement is made by Lorillard Tobacco Company pursuant to a court Order in United States of America, et al. v. Philip Morris USA, Inc., et al., Civil Action No. 99-2496 (GK) (Order #1015, Aug. 17, 2006, at 4; Final Op. at 1636) (on appeal).” See Lorillard Tobacco Company’s Proposed Corrective Statements Required by Order #1015. The Intervenors in this action also recommend that the messages contain a clear statement to the effect that “a Federal District Court is requiring us to make this statement.” See Plaintiff-Intervenors’ Proposed Corrective Statements and Supporting Memorandum.

The United States does not know whether the purpose of the remedy will be served by inclusion of such declarations in the corrective statements. Without market testing, it is difficult to know the impact or effectiveness of that communication. This example makes clear the need to market test the statements to gauge their impact on the consuming public. An independent marketing firm should test the messages with and without the declaration, determining which form of the communication serves to best correct the existing misperceptions.

(3) Whether the Court should approve all relevant details of such corrective statements, such as print size, colors, spacing and format, voice-over in television advertisements, etc.

The Court should adopt an integrated proposal for corrective statements that addresses both content and format. As the Court is well aware, defendants have an incentive to comply with the letter of the Court’s order while creating and disseminating communications that avoid their intended effects. While defendants’ October 16 submissions addressed only the text and not the format or other details of how the corrective statements will be communicated to the public, each defendant attempted, in different ways, to limit or nullify the effectiveness of the

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5

statements. Defendants’ submissions demonstrate, starkly, that the implementation of the corrective statements cannot be left to their discretion. As described above, the Court can achieve this result without involving itself in decisions about minutiae by retaining independent consultants with expertise in developing effective multimedia communications. In ordering the corrective statements, the Court found that “[t]he trial record amply demonstrates that Defendants have made false, deceptive, and misleading public statements about cigarettes and smoking from at least January 1954 . . . . [and] that certain Defendants’ public statements communicating their positions on smoking and health issues continue to omit material information or present information in a misleading fashion” even today. Final Op. at 1632. The Court expressly found that while “certain language in some of Defendants’ most recent positions on smoking and health issues . . . represent a step forward[,]” id. at 1633, those recent changes were not sufficient to prevent and restrain future fraudulent statements, much less correct their “decades of denial and distortion.” Id. Moreover, the Court found that “[e]vidence in the record also amply demonstrates that certain of Defendants’ public statements communicating their positions on smoking and health issues continue to omit material information or present information in a misleading and incomplete fashion.” Id. at 1632. Clearly, it is the Court’s intent that the corrective statements will not simply be a pro forma utterance of mandated words, but rather, will have the effect of actually correcting defendants’ ongoing false statements.

Defendants, however, have each proposed text that makes no progress beyond the first step forward acknowledged by the Court and that may constitute continuing affirmative statements that are fraudulent. For example:

BATCo also continues to acknowledge only “health effects” from smoking, rather than any of the actual fatal diseases caused by smoking.

• Philip Morris’s proposed statements are virtually identical to its existing website statements (which the Court clearly found to be only a “first step” toward correcting its decades of deceit); the only change in content is its statement that the nicotine in cigarettes is addictive and that “well-known” design features affect the delivery of nicotine.2

• Lorillard’s and Reynolds American’s statements do not concede that smoking and secondhand smoke causes disease and are couched in language that cannot effectively communicate the intended message in any media; the statements are long, cluttered, and technical.

A more complete comparison between each defendant’s existing statements and its proposed “corrective” statements is set forth in a chart, attached hereto as Exhibit A. This comparison amply demonstrates defendants’ intention to limit the effect of the corrective

—–

2 Philip Morris has presented no evidence that any design features are “well known” to consumers.

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7

statements. Consequently, the Court should foreclose defendants’ ability to influence in any way the format or content of the statements.

Defendants complain that the United States is seeking remedial relief beyond that which they had an opportunity to litigate, pursuant to United States v. Microsoft. This is not true. The remedy that Defendants make corrective statements to help dispel the misperceptions created by their fifty plus years of deceiving the American public has long been a part of the United States’ case. The genesis of the United States’ request for corrective statements dates back to its complaint. The Amended Complaint expressly requests an injunctive order that, “each defendant fund, but have no part of or influence over the control of or decision making relating to, a legitimate and sustained corrective public education campaign, administered and controlled by an independent third party, relating to the public health issues of cigarette smoking and nicotine addiction.” and that “each defendant make corrective statements regarding the health risks of cigarette smoking and the addictive properties of nicotine in future advertising, marketing, and promotion of their tobacco products.” See Amended Cplt. § VII.B.2.f. and h. The United States disclosed in discovery this same remedy. See United States’ Responses to Joint Defendants’ Fourth Set of Continuing Interrogatories to Plaintiff, (Dec. 14, 2001) at 43 (same); United States’ Supplemental Responses to Joint Defendants’ Fourth Set of Continuing Interrogatories to Plaintiff, (Mar. 29, 2004) (same); U.S. Proposed Conclusions of Law, (July 2004) at 76-79 (corrective statements necessary to eviscerate ongoing fraud).

The United States developed testimony at trial on this issue as well. Eriksen WD (remedies) at 11 (recommendation that the Court order corrective communications devised by an independent third party). Defendants had a full and fair opportunity to take discovery on and

**———————————————————

8

litigate this issue during the remedies phase of the trial. Defendants cross-examined Dr. Eriksen at trial and were in no way limited on the scope of their cross-examination. See Trial Tr. 21102- 21122. Defendants’ tactical decision not to examine Dr. Eriksen about his opinion that an independent third party should develop the corrective statements cannot now be exploited to minimize the effectiveness of the ordered remedies.

The United States submitted its proposed remedial order at the conclusion of trial. The proposed order states that, “[t]he IO shall have authority to retain appropriate consultants to assist in the development, design, coordination, and execution of the affirmative communications as ordered herein, in order to ensure scientific accuracy, and to ensure maximum exposure and comprehension by smokers and the general public.” See United States’ Notice of Filing Proposed Final Judgment and Order Pursuant to Order #964-A at § IV.E.3. Although the Court rejected the proposal to order monitors, this decision does not limit the Court’s own ability to control a remedial scheme that it did impose.

The salient point, however, is that an effort to make the remedial action effective and meaningful is not a request for a new or different remedy – it is nothing more than the implementation of a long requested, court-ordered remedy. To be sure, statements disseminated to the public with an intended purpose of correcting misperceptions – and certainly those disseminated by an industry found to have engaged in a long running and overarching campaign to deceive the public on these very issues, through a similar process, and in the same media in which the statements are to be disseminated – ought be independently tested to achieve a level of confidence that the statements will meet their intended purpose.

Dated: October 30, 2006

Washington, DC

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9

Respectfully submitted,

PETER D. KEISLER

Assistant Attorney General

STUART SCHIFFER

Deputy Assistant Attorney General

/s/

LINDA M. McMAHON

DC Bar No. 446130

/s/

MICHELLE GLUCK

United States Department of Justice

Post Office Box 14524

Ben Franklin Station

Washington, DC 20044

Attorneys for Plaintiff

United States of America

**———————————————————

http://www.tobacco-on-trial.com/files/20061030dojcorrcompare.pdf

**———————————————————

Exhibit A

Comparison of Defendants’ Current Public Statements With Their Proposed “Corrective” Statements

PMUSA’s Current Website Statements

PMUSA’s Proposed “Corrective” Statements

Health Effects of Smoking

Philip Morris USA (PM USA) agrees with the overwhelming medical and scientific consensus that cigarette smoking causes lung cancer, heart disease, emphysema and other serious diseases in smokers. Smokers are far more likely to develop serious diseases, like lung cancer, than non-smokers. There is no safe cigarette.

Health Effects of Smoking

Cigarette smoking causes lung cancer, heart disease, emphysema, and other serious diseases in smokers. Smokers are far more likely to develop serious diseases, like lung cancer, than non-smokers. Smoking by pregnant women increases the risks for fetal injury, premature birth, and low birth weight. There is no safe cigarette.

Addictiveness of Smoking

Philip Morris USA agrees with the overwhelming medical and scientific consensus that cigarette smoking is addictive. It can be very difficult to quit smoking, but this should not deter smokers who want to quit from trying to do so.

Addictiveness of Smoking

Cigarette smoking is addictive. The nicotine in cigarette smoke is addictive. It can be difficult to quit smoking, but this should not deter smokers who want to quit from trying to do so.

No Health Benefit to “Light” Cigarettes

A smoker should not assume that brand descriptors such as “light” or “ultra light” indicate with precision either the actual amount of tar and nicotine inhaled from any particular cigarette, or the relative amount as compared to competing cigarette brands. Some researchers report that smokers of “light” cigarettes inhale as much tar and nicotine as from full-flavor brands. The amount of tar and nicotine inhaled will be higher if, for example, a smoker blocks ventilation holes, inhales more deeply, takes more puffs or smokes more cigarettes.

PM USA does not imply in our marketing, and smokers should not assume, that lower-yielding brands are safe or safer than full-flavor brands. There is no safe cigarette. “Medium,” “mild,” “light” and “ultra light” cigarettes are no exception. Health warnings are required on all of our brands, irrespective of their tar and nicotine yields. . . . . It is important to remember that, as of today, there is no cigarette on the market which the public health community endorses as offering “reduced risk.” It continues to be the case that, if smokers are concerned about the risks of smoking, quitting is by far their best alternative for reducing those risks

No Health Benefit to “Light” Cigarettes

There is no safe cigarette. “Low tar,” “light,” “ultra light,” “medium,” and “mild” brands are no exception. You should not assume that these brands are safe or safer than full flavor brands or that smoking these brands will help you quit. If you are concerned about the health risks of smoking, you should quit

PMUSA’s Current Website Statements

PMUSA’s Proposed “Corrective” Statements

Dangers of Exposure to Secondhand Smoke:

Public health officials have concluded that secondhand smoke from cigarettes causes disease, including lung cancer and heart disease, in non-smoking adults, as well as causes conditions in children such as asthma, respiratory infections, cough, wheeze, otitis media (middle ear infection) and Sudden Infant Death Syndrome. In addition, public health officials have concluded that secondhand smoke can exacerbate adult asthma and cause eye, throat and nasal irritation

Dangers of Exposure to Secondhand Smoke:

Public health officials have concluded that secondhand smoke from cigarettes causes disease, including lung cancer and heart disease, in non-smoking adults, as well as causes conditions in children such as asthma, respiratory infections, cough, wheeze, otitis media (middle ear infection) and Sudden Infant Death Syndrome.

Nicotine Manipulation:

[S]ome have alleged that we use specific ingredients to affect nicotine delivery to smokers. That is simply not true.

Nicotine Manipulation:

Cigarettes deliver tar and nicotine. Well known design features affect the delivery of tar and nicotine. The amount of tar and nicotine you inhale will vary, depending upon how you smoke. Generally speaking, the more intensely you smoke a cigarette, the more tar and nicotine you will inhale.

BATCo’s Current Website Statements

BATCo’s Proposed “Corrective” Statements

Health Effects of Smoking

Smoking is a cause of various serious and fatal diseases, including lung cancer, emphysema, chronic bronchitis and heart diseases.

Studies

The health risks of smoking are derived from epidemiology.

Epidemiology is a statistically based science, dealing with risks among large groups of people, rather than with individuals. Through questionnaires and observations of people, epidemiological studies can identify the incidence of disease in a given group, such as smokers, and compare it with the incidence in another group, such as non-smokers.

Over many years, epidemiological studies have consistently reported a much higher incidence of certain diseases among smokers compared with non-smokers. The studies also report that the risks are reduced after quitting and that quitting earlier has by far the best effect on reducing risks.

Traditionally, epidemiology has been used to identify associations that point to possible causes of a disease, providing direction for thorough laboratory investigations. With smoking, the many laboratory investigations over the years have proved more problematic, and science has not to date been able to identify biological mechanisms which can explain with certainty the statistical findings linking smoking and certain diseases, nor has science been able to clarify the role of particular smoke constituents in these disease processes.

This means that science is still to determine which smokers will get a smoking related disease and which will not. Nor can science tell whether any individual became ill solely because they smoked. This is, in part, because all the diseases that have been associated with

Health Effects of Smoking

There are adverse health effects from cigarette smoking. For a list of health effects from smoking and a discussion of the relevant science, see the 2004 Report of the Surgeon General “The Health Consequences of Smoking.”

BATCo’s Current Website Statements

BATCo’s Proposed “Corrective” Statements

Addictiveness of Smoking

Smoking can be hard to quit. However, we believe it is important that smokers who decide to quit realise they can, provided they have the motivation to quit and the belief that they can. Many smokers are said to be dependent on cigarettes because they know the real risks of disease involved but still smoke frequently and find it very difficult to quit.

It has been known for centuries that smoking is difficult to quit. Under international definitions for determining whether people are dependent on smoking, including those from the World Health Organisation, many smokers would be classified as being dependent.

However, millions of smokers have quit without any medical help, and millions have modified how often, where and when they smoke in the light of differing social norms. In some countries, such as the UK, there are now as many ex-smokers as smokers.

While smoking is commonly understood to be addictive, we believe it is important that smokers who decide to quit realise they can, provided they have the motivation to quit and the belief that they can. We believe that if you want to quit, you should.

Various ways have been suggested to help people quit, including using ‘nicotine replacement therapy’ (patches and gums). While all these forms of assistance may be beneficial, the most important factors in successfully quitting are having the motivation to quit and the selfbelief that you can do so.

Addictiveness of Smoking

Cigarette smoking and nicotine are addictive.

BATCo’s Current Website Statements

BATCo’s Proposed “Corrective” Statements

No Health Benefit to “Light” Cigarettes

Lower tar products

After much work on specific smoke constituents, it was found that a practical and simpler way to reduce deliveries of individual smoke constituents would be to reduce smoke yields overall, as measured by a standardised machine method. The work, therefore, focused on using filters, ventilation and other design features to reduce tar. In lower tar products, there has been an overall reduction in the levels of most of the constituents of concern to governments and health bodies as measured by standardised machine test methods. However, many public health bodies no longer support the theory that lowering cigarette tar deliveries somewhat lowers the risks of smoking. Recent reports by the World Health Organisation and the US National Cancer Institute conclude that smoking lower tar delivery cigarettes does not reduce the risks of smoking. While the hypothesis that reducing exposure should reduce risks remains, questions are currently being asked as to whether low tar yielding cigarettes, as measured on machines, actually result in reduced exposure when in the hands of smokers.

The World Health Organisation and various other public health bodies have reported that exposure to environmental tobacco smoke (ETS), sometimes called ‘passive smoking’, is a cause of various diseases. The risks they report are far lower than those associated with active smoking, but are said to be large enough to make public smoking an important public health issue.

Our view of the science is that ETS exposure is associated with various short term health impacts, such as exacerbating symptoms in asthmatics and respiratory illnesses in children. The science on ETS and chronic diseases, such as lung cancer and heart disease, is in our view not definitive and at most suggests that if there is a risk from ETS exposure, it is too small to measure with any certainty.

So while we understand and support measures to reduce involuntary exposure to ETS, we do not believe that blanket bans on public and workplace smoking are fair or necessary, as there are more practical solutions based on air quality standards.

Dangers of Exposure to Secondhand Smoke:

There are adverse health effects from exposure to second hand smoke (also known as environmental tobacco smoke or ETS). For a list of health effects and a discussion of the relevant science, see the 2006 Report of the Surgeon General “The Health Consequences of Involuntary Exposure to Tobacco Smoke.”

Nicotine Manipulation:

N/A

Nicotine Manipulation:

BATCo manipulates the design of its cigarette brands to ensure that every cigarette of a particular brand or style will deliver the amount of nicotine (within 0.1 mg.) advertised for that brand, according to the test for nicotine in cigarette smoke adopted by the International Standards Organization.

**———————————————————

RJR/B&W’s Most Recent Website Statements1

Reynolds American’s Proposed “Corrective” Statements

Health Effects of Smoking

RJR: Smoking “causes disease in some individuals” but only “in combination with other factors.”

B&W: “Smoking cigarettes is a cause of lung cancer, emphysema, heart disease and other diseases.”

Health Effects of Smoking

The Surgeon General has concluded that cigarette smoking causes the following diseases and adverse health effects:

This message is furnished by [Defendant] pursuant to a Court Order and is taken from the 2004 Surgeon General’s Report.

You should rely upon your medical provider and the Surgeon General in making decisions regarding smoking.

RJR/B&W’s Most Recent Website Statements1

Reynolds American’s Proposed “Corrective” Statements

Addictiveness of Smoking

RJR: “Many people believe that smoking is addictive and as that term is commonly used today, it is. Many smokers find it difficult to quit and some find it extremely difficult. . . . [H]owever, we disagree with characterizing smoking as being addictive in the same sense as heroin, cocaine or similar substances.”

B&W: B&W “agrees that, by current definitions of the term ‘addiction,’ including that of the Surgeon General in 1988, cigarette smoking is addictive” but that:

“Although smoking can be very difficult to quit, we do not believe that the term “addiction” should be used to imply that there is anything in cigarette smoke that prevents smokers from reaching and implementing a decision to quit. Smoking may indeed be difficult to quit, but people can quit and do so in large numbers. The scientific literature demonstrates that smokers who believe they can quit, and who believe that the benefits of quitting outweigh the enjoyment of continuing to smoke, can do so.”

Addictiveness of Smoking

The Surgeon General has concluded:

Cigarettes and other forms of tobacco are addicting. Nicotine is the drug in tobacco that causes addiction.

This message is furnished by [Defendant] pursuant to a Court Order and is taken from the 1988 Surgeon General’s Report.

You should rely upon your medical provider and the Surgeon General in making decisions regarding smoking.

RJR/B&W’s Most Recent Website Statements1

Reynolds American’s Proposed “Corrective” Statements

No Health Benefit to “Light” Cigarettes

RJR: “Our company, like other cigarette manufacturers, uses brand descriptors such as ‘full flavor,’ ‘lights’ and ‘ultra lights’ to differentiate cigarette brand-styles in terms of such characteristics as strength of taste, and reported ‘tar’ and nicotine yield. These terms do not, and are not meant to, imply that any cigarette brand-style or any category of cigarettes is safer than any other.”

B&W: “Cigarette brands in the U.S. are usually identified on packs, cartons and advertising as belonging to the following categories: ‘Ultra Lights’ or ‘Ultra Low Tar’, ‘Lights’ or ‘Low Tar’, and ‘Full Flavor” . . . .

Recent published studies suggest that the majority of smokers use descriptors to guide their product selection based on taste. . . . It is not Brown & Williamson’s intention to suggest that any individual brand, regardless of the category descriptor terminology used, or tar yield, is safer than any other. . . . We do not believe that people who are concerned about the health risks of smoking should view lower tar products as an alternative to quitting.”

No Health Benefit to “Light” Cigarettes

The Surgeon General has concluded:

Smoking cigarettes with lower machine-measured yields of tar and nicotine (including those that have been labeled “low tar,” “light,” “ultra light, “mild” and “natural”) provides no clear benefit to health in comparison to smoking cigarettes with higher machine measured yields of tar and nicotine.

This message is furnished by [Defendant] pursuant to a Court Order and is derived from the 2004 Surgeon General’s Report.

You should rely upon your medical provider and the Surgeon General in making decisions regarding smoking.

RJR/B&W’s Most Recent Website Statements1

Reynolds American’s Proposed “Corrective” Statements

Dangers of Exposure to Secondhand Smoke:

RJR: Reynolds’ website stated “that there are still legitimate scientific questions concerning the reported risks of secondhand smoke” and that “considering all of the evidence, in our opinion, it seems unlikely that secondhand smoke presents any significant harm to otherwise health nonsmoking adults at the very low concentrations commonly encountered in their homes, offices and other places where smoking is allowed. We recognize that exposure to high concentrations of secondhand smoke may cause temporary irritation, such as teary eyes, and even coughs and wheezing in some adults. In addition, there is evidence that secondhand smoke, like other airborne irritants, or allergens such as pollen and dust may trigger attacks in asthmatics.” B&W: “In our opinion and in the opinion of others, . . . there are legitimate scientific questions concerning the extent of the chronic health risks of ETS.”

Dangers of Exposure to Secondhand Smoke:

The Surgeon General has concluded:

Exposure to environmental tobacco smoke has been proven to cause premature death and disease in children and in adults who do not smoke. Children exposed to secondhand smoke are at an increased risk for sudden infant death syndrome (SIDS), acute respiratory infections, ear problems, and more severe asthma. Smoking by parents causes respiratory symptoms and slows lung growth in their children. Exposure of adults to secondhand smoke has immediate adverse effects on the cardiovascular system and causes coronary heart disease and lung cancer. The scientific evidence indicates that there is no risk-free level of exposure to secondhand smoke.

This message is furnished by [Defendant] pursuant to a Court Order and is taken from the 2006 Surgeon General’s Report.

You should rely upon your medical provider and the Surgeon General in making decisions regarding smoking.

Nicotine Manipulation:

RJR “do[es] not add nicotine or any nicotinic compounds to any of our cigarettes, nor do we do anything to enhance the effects of nicotine on the smoker.”

B&W: “Brown & Williamson does not in any way control the level or nature of nicotine in cigarettes to induce people to start smoking or to prevent people from quitting.”

Nicotine Manipulation:

A United States District Court has found that:

“Cigarettes are specifically designed to deliver a range of nicotine doses so that a smoker can obtain her optimal dose from virtually any cigarette on the market, regardless of that cigarette’s nicotine delivery level as measured by the FTC method.”

“Cigarette manufacturers controlled the amount and form of nicotine delivery in commercial products by controlling the physical and chemical make-up of the tobacco blend and filler.”

This message is furnished pursuant to a Court Order by [Defendant].

You should rely upon your medical provider and the Surgeon General in making decisions regarding smoking.

Lorillard’s Recent Public Statements2

Lorillard’s Proposed “Corrective” Statements

Health Effects of Smoking

Cigarette smoking is a risk factor for disease.

Health Effects of Smoking

The Surgeon General has concluded that the evidence is sufficient to infer a causal relationship between cigarette smoking and the following: Bladder cancer, cervical cancer, cancers of the esophagus, renal cell and renal pelvis cancers, cancer of the larynx, acute myeloid leukemia, lung cancer, cancers of the oral cavity and pharynx, pancreatic cancer, gastric cancers, abdominal aortic aneurysm, subclinical atherosclerosis, stroke, coronary heart disease, chronic obstructive pulmonary disease morbidity and mortality, acute respiratory illnesses, including pneumonia, in persons without underlying smoking-related chronic obstructive lung disease, impaired lung growth during childhood and adolescence, early onset of lung function decline during late adolescence and early adulthood, respiratory symptoms in children and adolescents, including, coughing, phlegm, wheezing, and dyspnea, asthma-related symptoms (i.e., wheezing) in childhood and adolescence, premature onset of and an accelerated age-related decline in lung function in adults, all major respiratory symptoms among adults including coughing, phlegm, wheezing, and dyspnea, poor asthma control, nuclear cataract, diminished health status that may manifest as increased absenteeism from work and increased use of medical care services, increased risks for adverse surgical outcomes related to wound healing and respiratory complications, hip fractures, low bone density in postmenopausal women, peptic ulcer disease in persons who are Helicobacter pylori positive, and periodontitis.

The Surgeon General has also concluded that the evidence is sufficient to infer a causal relationship between maternal smoking during pregnancy and the following:

The Surgeon General has also concluded that the evidence is sufficient to infer a causal relationship between maternal smoking during and after pregnancy and sudden infant death syndrome.

These conclusions are contained in the 2004 Surgeon General’s Report. Lorillard encourages consumers to rely upon the conclusions of the Surgeon General in making decisions about smoking.

Lorillard’s Recent Public Statements2

Lorillard’s Proposed “Corrective” Statements

Addictiveness of Smoking

Lorillard’s website stated that “Cigarette smoking can also be addictive”; Lorillard also publicly stated that smoking is addictive in the same sense as any pleasurable activity that can be difficult to stop.

Addictiveness of Smoking

The following statement is made by Lorillard Tobacco Company pursuant to a Court Order in United States of America, et al. v. Philip Morris USA, Inc., et al., Civil Action No. 99-2496 (GK) (Order #1015, Aug. 17, 2006, at 4; Final Op. at 1636) (on appeal).

The Surgeon General has concluded:

Cigarettes and other forms of tobacco are addicting. Nicotine is the drug in tobacco that causes addiction.

These conclusions are contained in the 1988 Surgeon General’s Report. Lorillard encourages consumers to rely upon the conclusions of the Surgeon General in making decisions about smoking.

Lorillard’s Recent Public Statements2

Lorillard’s Proposed “Corrective” Statements

Dangers of Exposure to Secondhand Smoke:

Lorillard has never admitted that secondhand smoke causes disease in any form. Lorillard’s website directed readers to public health authority statements on secondhand smoke.

Dangers of Exposure to Secondhand Smoke:

The following statement is made by Lorillard Tobacco Company pursuant to a Court Order in United States of America, et al. v. Philip Morris USA, Inc., et al., Civil Action No. 99-2496 (GK) (Order #1015, Aug. 17, 2006, at 4; Final Op. at 1636) (on appeal).

The Surgeon General has concluded:

The evidence is sufficient to infer a causal relationship between exposure to secondhand smoke and sudden infant death syndrome; and a lower level of lung function during childhood.

The evidence is sufficient to infer a causal relationship between maternal exposure to secondhand smoke during pregnancy and a small reduction in birth weight; and persistent adverse effects on lung function across childhood. The evidence is sufficient to infer a causal relationship between secondhand smoke exposure from parental smoking and lower respiratory illnesses in infants and children; middle ear disease in children, including acute and recurrent otitis media and chronic middle ear effusion; cough, phlegm, wheeze, breathlessness and ever having asthma among children of school age; and the onset of wheeze illnesses in early childhood.

The evidence is sufficient to infer a causal relationship between exposure to secondhand smoke and lung cancer among lifetime nonsmokers; increased risks of coronary heart disease morbidity and mortality among both men and women; odor annoyance; nasal irritation; atherosclerosis in animal models; endothelial cell dysfunctions; a prothrombotic effect; and tumors in laboratory animals.

These conclusions are contained in the 2006 Surgeon General’s Report. Lorillard encourages consumers to rely upon the conclusions of the Surgeon General in making decisions about smoking.

Lorillard’s Recent Public Statements2

Lorillard’s Proposed “Corrective” Statements

1. Reynolds American has taken down its website statements on smoking and health. The above are recent public statements by those companies on these topics.

2. Lorillard has taken down its corporate website. The above are recent public statements by the company on these topics.

No Health Benefit to “Light” Cigarettes

N/A

No Health Benefit to “Light” Cigarettes

The following statement is made by Lorillard Tobacco Company pursuant to a Court Order in United States of America, et al. v. Philip Morris USA, Inc., et al., Civil Action No. 99-2496 (GK) (Order #1015, Aug. 17, 2006, at 4; Final Op. at 1636-37) (on appeal).

The Surgeon General has concluded:

Smoking cigarettes with lower machine-measured yields of tar and nicotine (including those that have been labeled “low tar,” “light,” “ultra light, “mild” and “natural”) provides no clear benefit to health in comparison to smoking cigarettes with higher machine-measured yields of tar and nicotine.

This conclusion is contained in the 2004 Surgeon General’s Report. Lorillard encourages consumers to rely upon the conclusions of the Surgeon General in making decisions about smoking.

Nicotine Manipulation:

Lorillard’s public statements have stated that “nicotine follows tar levels” and that the company “does not take any steps to assure a minimum level of nicotine in our products.”

Nicotine Manipulation:

The following statement is made by Lorillard Tobacco Company pursuant to a Court Order in United States of America, et al. v. Philip Morris USA, Inc., et al., Civil Action No. 99-2496 (GK) (Order #1015, Aug. 17, 2006, at 4; Final Op. at 1636) (on appeal).

Cigarette manufacturers “controlled the amount and form of nicotine delivery in their commercial products by controlling the physical and chemical make-up of the tobacco blend and filter.”

**———————————————————

http://www.tobacco-on-trial.com/files/20061030jdresponse.pdf

**———————————————————

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA,

Plaintiff,

And

TOBACCO-FREE KIDS ACTION FUND,

et al.,

Plaintiff-Intervenors,

v.

PHILIP MORRIS USA INC. (f/k/a

PHILIP MORRIS INCORPORATED),

et al.,

Defendants.

Next Scheduled Court Appearance: None

Civil Action No. 99-CV-2496 (GK)

CERTAIN DEFENDANTS’ MEMORANDUM IN RESPONSE TO THE COURT’S OCTOBER 19, 2006 ORDER

This Court’s August 17, 2006 Final Judgment and Remedial Order (“Order”) instructed each party to “submit a proposal for the exact wording of . . . corrective statements” within 60 days of the date of the Order. Order ¶ II.B.5 (emphasis added). Instead of complying with the Court’s Order, the government and Intervenors submitted memoranda requesting the Court to appoint a third party to develop text for the corrective statements — as well as formatting and presentation — that in their view would be appropriate and effective for particular mediums, and then to test market those statements before they were publicly disseminated. Faced with these submissions, which would lengthen the process significantly, the Court, in an order of October 19, 2006, instructed the parties to submit supplemental memoranda addressing the following issues:

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2

• The practical impact of adopting the proposals contained in the submissions of the government and plaintiff-intervenors, including that the Court consult with appropriate independent experts, to be paid by defendants, to evaluate any proposed corrective statements, and that the Court undertake basic market testing research to evaluate the effectiveness of such statements;

• Whether the corrective statements should indicate that they are being issued pursuant to Court Order; and

• Whether the Court should approve all relevant details of such corrective statements, such as print size, colors, spacing and format, voice-over in television advertisements, etc.

This memorandum responds to the Court’s request. As explained below, the government’s and Intervenors’ proposals ignore the Order. Both of their proposals are untimely and unsupported attempts to modify the Court’s judgment. Further, the proposals infringe defendants’ substantive legal rights as described in United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001), and would improperly delegate the Court’s authority to non-judicial personnel to the extent the proposed third party would choose both the content of the statements and the criteria to assess whether the chosen statements are “effective.” And beyond these substantive infirmities, the proposals are also highly impractical. Both proposals would draw out the process indefinitely, contrary to what the Court ordered. Accordingly, for these reasons and those set forth below, the Court should disregard the government’s and Intervenors’ submissions and base the corrective statements it issues on defendants’ submissions, which (1) fully comply with the Court’s mandate, (2) would permit the Court’s Order to be implemented without necessarily extending the deadlines in the Court’s mandate; and 3) would avoid unnecessarily tangling the Court in a time-consuming, fact-intensive process.

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3

I. The Court Should Reject the Proposals Contained in the Submissions of the Government and Intervernors, Including The Proposal that the Court Consult with Independent Experts and Undertake Market Testing and Research.

As an initial matter, the Court should not consider the government’s and Intervenors’ submissions. The lengthy trial of this case is over. The Court entered a Final Judgment and Remedial Order that clearly directed the parties to “submit a proposal for the exact wording of . . . corrective statements.” Order II.B.5 (emphasis added). Defendants complied with the Court’s Order; the government and Intervenors did not. For that reason alone, their submissions should be disregarded.

Moreover, these submissions and the process they contemplate are flawed for a variety of reasons. First, the government’s and Intervenors’ submissions are in fact veiled attempts to seek reconsideration of this Court’s Order and an opportunity to supplement the record. Both requests are untimely and improper. During trial, the government specifically requested that corrective statements be approved by an Independent Monitor with the authority to retain consultants to “assist in the development, design, coordination and execution of the affirmative communications as ordered herein.” Proposed Remedies Order at 17. The Court correctly declined to impose the government’s proposal, ruling that it lacks “power . . . to delegat[e] substantial judicial powers to non-judicial personnel in violation of Article III of the Constitution.” Op. at 1650-51. The government’s and Intervenors’ new proposal is a mere reformulation of the government’s prior request and an improper attempt to “relitigate old matters.” See Lightfoot v. D.C., 355 F. Supp.2d 414, 421 (D.D.C. 2005).

Where, as here, the ten-day deadline for filing a Rule 59(e) motion to amend or modify a judgment has expired, the Court possesses jurisdiction to modify its order only if plaintiffs can demonstrate entitlement to relief under Rule 60(b) of the Federal Rules of Civil Procedure. See Lightfoot, 355 F. Supp.2d at 420 (“The general rule is that a motion for reconsideration is treated

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4

as a ‘[Fed.R.Civ.P.] 59(e) motion if filed within 10 days of entry of the challenged order and as a Rule 60(b) motion if filed thereafter.’”) (quoting United States v. Pollard, 290 F. Supp.2d 153, 156 (D.D.C. 2003. To be sure, the Court also possesses inherent authority to modify an injunction where such modification is necessary to effectuate the purposes of the original order. See 1250 24th Street Assocs. Ltd. P’ship v. Brown, 684 F. Supp. 326, 328-329 (D.D.C. 1988). As a practical matter, however, this standard is encompassed by Rule 60 standards. See Pigford v. Johanns, 416 F.3d 12, 16 (D.C. Cir. 2005); Wright and Miller, 11A Fed. Prac. & Proc. Civ.2d § 2961 (Rule 60 “is little more than a codification of the universally recognized principle that a court has continuing power to modify or vacate a final decree.”). The government and Intervenors fail to demonstrate the applicability of any of the Rule 60(b) provisions and, thus cannot justify modification of the Court’s Order.

Furthermore, even if the government and Intervenors had not made this precise proposal before, the proposal would be an impermissible attempt to raise issues that could have been presented during the nine month trial, in the 2,500 pages of proposed findings of fact, or in the hundreds of pages of post-trial briefing. Presumably, the government and Intervenors now believe that the record they created cannot justify a corrective statements remedy without more evidence. But the government and Intervenors should not be allowed to convert the Court’s Order requiring the “exact wording” of the corrective statements into an additional opportunity to advance the arguments and theories they neglected to make before. This is an improper basis for modification and should be rejected. See Lightfoot, 355 F. Supp.2d at 421 (motions to reconsider should not be used to “present evidence that could have been raised prior to the entry of judgment.” )

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5

Additionally, the government’s and Intervenors’ proposals would violate defendants’ rights under the Due Process Clause and conflict with the holding in United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001). In Microsoft, after the evidentiary phase of the trial was concluded, the plaintiffs, including the United States and various states, submitted a proposed remedy for inclusion in the final judgment that had not been previously proposed. Microsoft, 253 F.3d at 98. Over Microsoft’s objection, the court entered final judgment without further evidentiary proceedings “because it doubted that an evidentiary hearing would ‘give any significantly greater assurance that it will be able to identify what might be generally regarded as an optimum remedy.’” Id. at 99. The court then entered a remedies order that was nearly identical to the plaintiffs’ proposal. See id. On appeal, the D.C. Circuit reversed, holding that “[i]t is a cardinal principle of our system of justice that factual disputes must be heard in open court and resolved through trial-like proceedings.” Id. at 101. The Court, noting that “the parties disputed a number of facts during the remedies phase,” id. at 101, held that it was error for the trial court not to hold an evidentiary hearing. Here, the government is seeking to introduce new evidence through third-party “experts” more than a year after the close of trial and over two months after the Court issued its Order. To consider the government’s new evidence would constitute a fundamental violation of Microsoft.1

Finally, practical considerations independently militate against adopting the government’s and Intervenors’ proposals. The time consuming procedures the government and Intervenors recommend will result in substantial delays and render it impossible to meet the Court’s time-table. The process the Government envisions — of retaining a third party, having

—–

1 Indeed, the government’s proposal, if adopted, would be akin to permitting it to designate experts post trial without providing reports or permitting them to be deposed.

**———————————————————

6

that third party develop proposed statements itself, develop designs, and then test market those statements and designs — would take months at a minimum. Implementation of the final statements will require an additional several months to implement. See Declaration of David Beran at ¶¶ 5-6 (submitted with PM USA’s Corrective Statements). In addition, the government’s proposal will require an extraordinary level of Court involvement and supervision as well as delay.

II. Whether to Include Attribution Depends on the Content of the Statement, and the Court should Permit Defendants to Make this Determination on a Statement by Statement Basis.

As defendants’ proposed corrective statements submissions reflect, defendants hold differing views about whether the statements should be attributed to the Court’s Order. Defendants have articulated their respective views on the propriety of attribution to the Court’s Order in their prior submissions. See Philip Morris USA’s Proposed Corrective Statements As Compelled By The Final Judgment and Remedial Order at 3-7; Certain Joint Defendants’ Submission of Proposed Corrective Statements Pursuant to Order # 1015 at 3-7; Submission of British American Tobacco (Investments) Limited (“BATCo”) Pursuant to Order # 1015,§ II.B.¶5 at 2; Lorillard Tobacco Company’s Proposed Corrective Statements Required By Order # 1015 at 2-5.

Defendants, however, agree that they have a clear constitutional right to disassociate themselves from compelled speech and that this right requires that they have the option to indicate that objectionable statements are made pursuant to the Court’s Order. See United States v. Nat’l Soc. of Professional Engineers, 555 F.2d 978, 984 (D.C. Cir. 1977) (where court strikes professional society’s rule that competitive bidding was unethical, and requires the society to state that the rule has been judicially invalidated on antitrust grounds, it was improper for a district court to require the society to state that “in its view” competitive bidding was ethical);

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7

Planned Parenthood Minnesota v. Rounds, 375 F. Supp.2d 881, 886-87 (D.S.D. 2005) (striking down legislation requiring compelled speech where no opportunity for speaker to disassociate him or herself from content of speech); see also Prune Yard Shopping Center v. Robins, 447 U.S. 74 (1980) (upholding law requiring shopping mall owner to permit petitioning on its property because no risk existed that the speech would be attributed to property owner). Accordingly, defendants should have the option of including a statement of attribution in any statement ultimately approved by the Court.

Defendants object to the inclusion of an introductory phrase suggesting that the content of the statements conflicts with defendants’ prior positions, such as the introductory phrases proposed by the government (“Despite our prior denials”) and Intervenors (“For decades, we deliberately misled the American Public about the health effects of smoking”). In the first place, the purpose of the statements, in the Court’s view, is to provide information to consumers, not to unfairly prejudice consumers against these defendants. Yet that is the only conceivable justification for these introductory clauses. In any event, the government and Intervenors in their submissions provided no supporting materials, let alone citations to this Court’s findings, for their claims, often erroneous, that defendants denied each of the “concepts” it submitted, or that such statements are required to prevent or restrain future RICO wrong-doing. See, e.g., Op at 1635.

III. The Court Should Not Approve All Relevant Details of the Corrective Statements.

The Court’s Order is unambiguous in what it required the parties to submit — it required the submission of the “exact wording” of proposals. Nonetheless, the government and Intervenors ask the Court to go beyond approving the wording of the corrective statements and involve itself in every aspect of the development and dissemination of the corrective statements. Under the government’s and Intervenors’ view, the Court should dictate everything from the

**———————————————————

8

print size, to color, spacing and format — a result the Court’s Order clearly does not contemplate. Like the government’s and Intervenors’ other requests, this too would involve an exceptional level of court involvement and the expenditure of significant judicial resources. This approach was not ordered and was not contemplated by the Court’s Order, and the Court should not become entangled in micromanaging the vast number of details that will arise in publishing these statements.2 The government and Intervenors again fail to justify modifying the Court’s Order in the manner proposed.

Additionally, defendants are concerned that such specification will adversely impact implementation, timing, or efficiency. For example, if the Court specifies a type size that is too large or too small for the multitude of different sized header displays, the parties’ ability to rapidly implement the Order will be severely disrupted by the need to make submissions on such details. And while the Intervenors seek to have a third party develop its statements into proper and effective corrective statements, the “statements” they submit — if considered that — fall far short of that mark. They are extremely lengthy, which makes it unlikely that they will be read, let alone understood, in the context in which the Court has ordered them to be made. They contain graphic images that are neither part of the record nor contemplated by this Court’s request for “exact wording,” and which the government did not request at trial. The defendants intend to implement the required statements in a simple and direct manner. Thus, they request that the Court approve the wording of the corrective statements as contemplated in the Order, and not extend the reach of the Order to the level of detail demanded by the Government Intervenors.

—–

2 In no event should a third party be given blanket authority to develop the print size, color, spacing and format of the statements.

**———————————————————

9

CONCLUSION

For the foregoing reasons, defendants respectfully request that the Court reject the government and Intervenors’ proposals in their entirety and instead base the corrective statements on defendants’ respective proposals.

DATED: October 30, 2006

Respectfully submitted,

/s/ Matthew A. Campbell for _______________

Timothy M. Broas (D.C. Bar No. 391145)

WINSTON & STRAWN LLP

1700 K Street, N.W.

Washington, D.C. 20006-3817

Telephone: (202) 282-5000

Fax: (202) 282-5100

Dan K. Webb

Thomas J. Frederick

WINSTON & STRAWN LLP

35 West Wacker Drive

Chicago, Illinois 60601-9703

Telephone: (312) 558-5600

Fax: (312) 558-5700

Theodore V. Wells, Jr. (D.C. Bar No. 468934)

James L. Brochin (D.C. Bar No. 455456)

PAUL, WEISS, RIFKIND, WHARTON &

GARRISON LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Telephone: (212) 373-3000

Fax: (212) 757-3990

Attorneys for Defendants

Altria Group Inc. and Philip Morris USA Inc.

/s/ Matthew A. Campbell for _______________

Robert F. McDermott (D.C. Bar No. 261164)

Peter J. Biersteker (D.C. Bar No. 358108)

**———————————————————

10

JONES DAY

51 Louisiana Avenue, N.W.

Washington, D.C. 20001-2113

Telephone: (202) 879-3939

Fax: (202) 626-1700

Paul G. Crist

JONES DAY

North Point

901 Lakeside Avenue

Cleveland, Ohio 44114-1190

Telephone: (216) 586-3939

Fax: (216) 579-0212

Attorneys for Defendant

R.J. Reynolds Tobacco Company

/s/ Matthew A. Campbell for _______________

David E. Mendelson (D.C. Bar No. 471863)

KIRKLAND & ELLIS LLP

655 15th Street, N.W., Suite 1200

Washington, D.C. 20005

Telephone: (202) 879-5000

Fax: (202) 879-5200

David M. Bernick

Stephen R. Patton

Renee D. Honigberg

KIRKLAND & ELLIS LLP

200 East Randolph Drive, Suite 5900

Chicago, Illinois 60601

Telephone: (312) 861-2000

Fax: (312) 861-2200

Attorneys for Defendant

Brown & Williamson Tobacco Holdings, Inc.

/s/ Matthew A. Campbell for _______________

Michael B. Minton

THOMPSON COBURN LLP

One US Bank Plaza, Suite 3500

St. Louis, Missouri 63101-1693

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11

Telephone: (314) 552-6000

Fax: (202) 552-7597

Kamran Q. Khan

SHOOK, HARDY & BACON LLP

2555 Grand Blvd.

Kansas City, Missouri 64108-2613

Telephone: (816) 474-6550

Fax: (816) 421-2708

Attorneys for Defendant

Lorillard Tobacco Company

/s/ Matthew A. Campbell for _______________

Bruce G. Sheffler

David L. Wallace

CHADBOURNE & PARKE LLP

30 Rockefeller Plaza, 34th Floor

New York, New York 10112-0219

Telephone: (212) 408-5100

Attorneys for Defendant

British American Tobacco (Investments)

Limited (f/k/a British-American Tobacco

Company Limited)

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http://www.tobacco-on-trial.com/files/20061030venorsresponse.pdf

**———————————————————

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

____________________________________

UNITED STATES OF AMERICA,

Plaintiff,

and

TOBACCO-FREE KIDS ACTION FUND,

et al.

Plaintiff-Intervenors

v.

PHILIP MORRIS USA, INC., et al.,

Defendants.

Civil Action No. 99-CV-2496 (GK)

____________________________________

PLAINTIFF-INTERVENORS’ SUBMISSION PURSUANT THE COURT’S ORDER #1025

Introduction

Pursuant to the Court’s Final Judgment and Remedial Order (Order # 1015), on October 16, 2006 the Public Health Intervenors (Tobacco-Free Kids Action Fund, American Cancer Society, American Heart Association, American Lung Association, Americans for Nonsmokers’ Rights, and National African American Tobacco Prevention Network) submitted proposed corrective statements on the five issues identified by the Court. In that submission, the Public Health Intervenors also recommended that, in order to insure that the Court-Ordered corrective statements serve their intended purpose, the Court should not only determine the precise wording of the corrective statements, but should rely on an independent communications/advertising firm to determine the specific criteria governing the execution of each of the statements (e.g., the print sizes and colors,

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voices, use of graphics). As is standard in the industry, this firm would oversee basic market testing before making final recommendations to the Court.

In response to this and the United States’ submissions, the Court has ordered the parties to address several issues. First, the Court has asked about the practical impact of taking these additional steps in connection with the corrective statements requirement. Second, the Court has inquired whether the statements should indicate that they are being issued pursuant to Court Order. Finally, the Court has asked whether it is appropriate for the Court to approve the details of the corrective statements, in addition to the specific wording of the statements. Order # 1025.

As explained below, the Public Health Intervenors believe it is entirely appropriate – indeed essential – for the corrective statements to indicate that they are issued by Court Order, as well as for the Court to approve the details of these statements. As regards the practical impact of determining these details, the Public-Health Intervenors recommend that the Court either permit the United States to oversee this task, as they have suggested, or alternatively, appoint a Rule 53 Special Master to do so. See Fed. R. Civ. P. 53. Either way, if adopting these steps for some media – such as the onserts – requires a relatively brief delay in the Court’s deadlines, the Public Health Intervenors believe that the enormous benefits that would accrue from insuring truly effective corrective statements far outweighs any risks posed by such a minor delay. In any event, as also explained below, all the steps being recommended can be completed in approximately six to eight weeks, which would not significantly delay the date by which the public will finally be hearing the truth about the adverse health impacts of smoking, addictiveness, nicotine manipulation, “light” cigarettes, and secondhand smoke.

2

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Discussion

1. The Practical Impact Of Plaintiffs’ Proposals

Both the United States and the Public Health Intervenors have recommended that, before the corrective statements are finalized, the Court should utilize an independent communications firm to develop the most effective design characteristics for each of the media. The Court has asked the parties to explain the practical impact of such an approach.

The first question the Court must address is who will oversee the appointment of these experts and their work. As a threshold matter, the Public Health Intervenors have no objection to the United States’ suggestion that they be authorized to be the managers of this project. See U.S. Notice of Compliance With Order # 1015, at 1. Under that approach, the Court would permit the United States to retain appropriate third party professionals to design and test the corrective statements based on the language selected by the Court and submit final products for the Court’s approval.

Alternatively, the Public Health Intervenors suggest that this might be an appropriate role for a Special Master, who, under Rule 53, may be appointed to “address pretrial and postrial matters that cannot be addressed effectively and timely by an available district judge . . . .” Fed. R. Civ. P. 53(a)(1)(C) (emphasis added); e.g., In re Holocaust Victim Asset Litigation, 282 F.3d 103, 104-07 (2d Cir. 2002) (discussing appointment of Special Master to implement a court-approved settlement). Earlier in this litigation, the Court appointed Judge Richard A. Levie (Ret.) as a Special Master. See Dec. 22, 2000 Order (making appointment); Order # 909 (terminating appointment). In light of the more than 170 reports Judge Levie issued in that role, and his consequent

Under either scenario, the Public Health Intervenors would recommend that the Court direct the United States (or the Special Master) to hire an independent communications/advertising firm that would take the specific language approved by the Court for each corrective statement and determine the relevant details governing the execution of each of the statements (e.g. the print sizes and colors, voices, use of graphics), after which the firm would make final recommendations for the Court’s approval.2 The Court would then issue a final Order approving the final artwork to be used by Defendants in each the five media.

As regards the selection of language, for all the reasons detailed in the Public Health Intervenors earlier Memorandum, the Court should choose the specific language

—–

1 Although, in response to requests for Court Monitors to oversee certain proposed corporate structural changes, the Court determined that it would be inappropriate to delegate such broad powers, see Opinion at 1648-52, the limited role that a Special Master would be playing here – i.e., overseeing implementation of the Court’s corrective statements requirement – raises none of those concerns. Id. at 1652 (“it is permissible for the court to appoint an individual to oversee and monitor implementation of a decree”).

2 As the Public Health Intervenors have explained, it is imperative that the firm hired for this project not have tobacco companies as current or recent clients. See Plaintiff-Intervenors’ Corrective Statements Memorandum (“PHI Mem.”) at 43.

4

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the Public Health Intervenors have proposed for each statement, including all three elements outlined – (a) the headline admission of Defendants’ prior deliberate misstatements; (b) the language indicating that the statement is being issued pursuant to a Court Order (see Part 2, infra); and (c) a listing of the most important accurate facts concerning each topic, presented in a succinct and simple manner. Of the proposed corrective statements submitted to the Court, the Public Health Intervenors believe – based on extensive experience in this kind of communication effort – that their proposed language will be the most effective at correcting the public’s and smokers’ misunderstandings on these topics.

The two other questions raised by this approach are the time and cost involved. To answer those questions, the Public Health Intervenors have consulted with two communications firms with whom they have worked in the past, and who have extensive experience in tobacco-education related advertising campaigns. Those firms have estimated that, once given the assignment, a firm could develop the final statements in six to eight weeks, two to three weeks of which would involve the market testing element. At the conclusion of the process the firm would produce, for the Court’s consideration and approval, the final artwork for each corrective statement in each medium, which the companies would use for placement.3

While this approach would not permit completion of the onserts by the November 9, 2006 date requested by Philip Morris, it would delay the completion date by only up to two months. While this would require the deadlines for the onserts to be extended, the

—–

3 For the newspapers, onserts, countertop displays, and websites, the final product would be camera ready documents that would just need to be appropriately sized for the specific media (e.g, to accommodate the size of the specific newspaper). For the television advertisements, the final product could be final film that would just need to be put into the appropriate format.

5

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Public Health Intervenors urge that the benefits in terms of insuring effective onserts – which will be directed primarily at smokers themselves (who buy the cigarette packs on which the onserts will appear) – far outweigh the downsides of such a brief delay. Thus, while the Public Health Intervenors agree that it is critical for the corrective statements to be issued as soon as possible, that urgency does not counsel against the additional steps recommended here.4

No similar concerns have been raised regarding the other media, and thus it appears that, even taking these steps, the deadlines for the other media may remain on or near the present timetable. These steps could certainly be completed in time to meet the February 2007 deadlines for the countertop displays and television advertisements. As for the newspaper advertisements, the first of which is due December 3, 2006, these steps might require moving the current schedule back for up to two periods. See Final Order at II.B.7.c (requiring advertisements to be run once every four weeks). Again, in the view of the Public Health Intervenors, such a brief delay would be well worth the benefits in terms of insuring that the corrective statements are as effective as possible.

Finally, in terms of cost, according to the several firms with whom the Public Health Intervenors have consulted, these steps (including the market testing) would cost at most, approximately $675,000, and potentially much less in light of the various fees

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4 Alternatively, in order to shorten the delay, the Court could forego the market testing, which would save two to three weeks. While basic market testing – which the Public Health Intervenors have assumed would involve 8-12 focus groups of 10-12 individuals, as well as an online survey of approximately 2,000 – would help to provide a final check on the corrective statements (see, e.g., Designing and Implementing an Effective Tobacco Counter-Marketing Campaign, Chapter 3 (”Gaining and Using Target Audience Insights”), Centers for Disease Control and Prevention, U.S. Department of Health and Human Services Office on Smoking and Health (October 2003) (Accessed at http://www. cdc.gov/tobacco/mcrc /countermarketing /pdf/Tobacco_CM_Manual.pdf); see also Making Health Communications Programs Work, Stage 2: Developing and Pretesting, National Cancer Institute, U.S. Department of Health and Human Services, at 83 (Accessed at www.cancer.gov/pinkbook)), in the Public Health Intervenors’ view the Court could direct that the outside firm forego this step if the Court adopted the Public Health Intervenors’ proposed language.

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charged by different agencies that do this kind of work.5 Even assuming the higher cost estimate here, when divided among the six Defendants this would require an expenditure of at most less than $115,000 each. Certainly, when compared to the Defendants’ exponentially larger advertising budgets, this is a paltry sum indeed. See, e.g., Op. at 997-99 (discussing billions of dollars spent on tobacco advertising).6

Moreover, if the Court were to simply dictate the language of the corrective statements, and then permit the Defendants to take these next steps on their own, they are likely to incur commensurate costs in any event, by either hiring their own communications firm, or paying staff to perform the work internally. Indeed, should Defendants each choose to take these steps independently, rather than pooling their efforts, it may be even more expensive than the approach Plaintiffs are proposing.

At the same time, Plaintiffs’ approach will also be more effective, for at least two reasons. First, as noted, if Defendants are permitted to control the relevant details of these statements, those details are likely to undermine their effectiveness. See PHI Mem. at 39-40 and Exhibit B (providing an example of an ineffective newspaper advertisement). Second, while, if permitted, Defendants are likely to create six very different designs, by having one independent firm design all of the corrective statements the Court will insure that consumers see the statements in one consistent design. In addition to the economic efficiencies of this approach, such statements will clearly be

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5 This estimate does not include the cost of purchasing any of the media – i.e., buying space in newspapers – which the Defendants will have to incur regardless of whether the Court adopts these proposals.

6 In this regard, it bears noting that a recent Center for Disease Control study concluded that, while smoking rates had been declining for eight straight years, that decline stalled in 2005, and suggested that “influencing factors may include” the fact that “tobacco-industry advertising and promotional expenditures . . . more than doubled from $6.7 billion in 1998 to $15.1 billion in 2003.” See Tobacco Use Among Adults — United States, 2005, 55 MMWR Weekly 1145, 1146 (2005) (available at www.cdc.gov/mmwr/ preview/mmwrhtml/mm5542a1.htm).

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more effective from a communications standpoint. In short, relying on a single independent firm to create one set of statements for each of the Defendants to use (with the only difference being the company name) will insure the use of an effective design that is communicated consistently to the public.

In sum, while it would cause some delay in the Court’s present deadlines, the steps the United States and the Public Health Intervenors are recommending are critical to insuring that these corrective statements are as effective as possible in counter-acting Defendants’ decades-long, multi-billion dollar effort to misinform the public about each of the issues the corrective statements will address.

2. Whether The Statement Should Indicate They Are Issued Pursuant to Court Order.

As for the Court’s second question, as the Public Health Intervenors have explained, it is critical that the corrective statements state that they are being provided pursuant to Court Order. See PHI Mem. at 26-27. This language is necessary both to insure the believability of the message, and to distinguish this advertising from Defendants’ independent advertising, which the public should continue to view with skepticism. Id.

Several Defendants have also specifically suggested this language. See Lorillard Tobacco Company’s Proposed Corrective Statements (“Lorillard Mem.”) at 2-3 (“The following statement is made by Lorillard Tobacco Company pursuant to a Court Order . . . ); Certain Joint Defendants’ Submission of Proposed Corrective Statements at 3-7 (“This message is furnished by [Defendants] pursuant to a Court Order . . .). While the Public Health Intervenors do not agree with Defendants’ argument that “[t]he first amendment requires that such attribution be included in any statement ordered by the

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Court,” Lorillard Mem. at 3 (emphasis added), there is no disagreement on the result, and thus the corrective statements should indicate that they are being issued pursuant to Court Order.

3. Whether The Court Should Approve All Relevant Details Of The Corrective Statements.

As the original submissions of the United States and the Public Health Intervenors demonstrated, it is both necessary and appropriate for the Court to approve all the details of the corrective statements before directing Defendants to issue them in the five media. See PHI Mem. at 18-44. The proposed corrective statements the Defendants have submitted to the Court only further reinforce those points.

In particular, even a cursory review of those proposals reveals that, far from correcting the decades of misinformation the Defendants have disseminated about their products, their proposals would either have no effect at all, or worse, would sow additional confusion about tobacco and its negative effects. For example, Lorillard recommends that the Court-Ordered corrective statement on the adverse health effects of smoking list more than thirty diseases and conditions, including “increased absenteeism from work and increased use of medical care services.” Lor. Mem. at 3. Certainly, this statement would not be an effective corrective communication.

Similarly, British American Tobacco (“BATCo”) recommends that the statement on nicotine manipulation state that:

BATCo manipulates the design of its cigarette brands to ensure that every cigarette of a particular brand or style will deliver the amount of nicotine (within 0.1 mg.) advertised for that brand, according to the test for nicotine in cigarette smoke adopted by the International Standards Organization.

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If anything, this statement will convey that BATCo’s manipulation of nicotine is entirely lawful and legitimate, rather than correcting the company’s prior misstatements concerning nicotine manipulation.

In light of the ineffectiveness of Defendants’ proposed language, it is evident that if the Court were to permit Defendants to control the other relevant details of the corrective statements, those other elements will also be designed to minimize, rather than maximize, the effectiveness of the message the corrective statements are meant to convey. Accordingly, Defendants’ proposed language further demonstrates that it is critical for the Court to approve all the relevant details of the corrective statements and thereby to prevent the Defendants from undermining their effectiveness.

It is also entirely appropriate for the Court to do so. As the Public Health Intervenors have noted, these are the kind of elements that the Federal Trade Commission dictated in a corrective statement approved by the D.C. Circuit. PHI Mem. at 37-39, citing Warner-Lambert Co. v. FTC, 562 F.2d 749, 763 (D.C. Cir. 1977) (dictating, e.g., the details of television advertisements). Moreover, in light of this Court’s overwhelming findings regarding Defendants’ myriad legal violations and decades-long efforts to misinform the public about the topics of the corrective statements, the Court should not only dictate the language of those statements, but should take these additional steps to insure that the final corrective statements are as effective as possible in achieving their intended purpose.

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CONCLUSION

For the foregoing reasons, the Public Health Intervenors urge the Court to not only identify the specific language of the corrective statements, but to take appropriate steps to insure that the relevant details of these corrective statement enhance, rather than detract from, their effectiveness.

Respectfully submitted,

/s/____________

Howard M. Crystal

(D.C. Bar No. 446189)

Katherine A. Meyer

(D.C. Bar No. 244301)

MEYER GLITZENSTEIN & CRYSTAL

1601 Connecticut Avenue, Suite 700

Washington, DC 20009

202-588-5206

October 30, 2006

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One Response to “UNPROVEN CORRECTIVES”

I heard this was a billion dollar law suit against Phillip Morris - anyone know the verdict? I’m curious to know of the payout (if any) Phillip Morris had to make and exactly how the funds were paid and to whom (besides the significant number of esquires on this case). Thanks.

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